Top Timers' Top Picks

Blindly following the herd can be a recipe for disaster in choppy markets like today's, so MoneyShow's Tom Aspray demonstrates how one could use technical analysis to assess whether or not a stock is a good buy.

The stock market seemed to be treading water, Monday, as even though the Dow Utilities were up 1.83%, the action overall was mixed with the advance/decline ratios neutral. Many want to be on the sidelines ahead of the FOMC announcement on Wednesday.

The market pundits seem to be hedged as some make the argument in favor of a 10% correction while others think the market could melt up. On a short-term basis, the major averages need a strong daily close to indicate that last week's correction has ended.

Asian markets were mixed but in the Eurozone the major averages are mostly higher. In early trading, the US futures were up early but have since turned lower. The better than expected economic data on Monday did encourage some bulls. Today we get the CPI and Housing Starts data, which may give the home construction stocks the boost they need to complete their bottom formations.

In the weekend Wall Street Journal, Mark Hulbert reviewed the outlook of those timers who have done the best over the past ten years. As part of the article, he listed four individual stocks that were recommended by at least two of these top timers. A look at the weekly charts of these four picks may help investors decide whether they should be bought at current levels.

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Chart Analysis: The Allstate Corporation (ALL) is a $25.5 billion property and casualty insurance company that has a current yield of 1.9%. It is up 8.8% YTD.

The weekly close on March 7 was an upside breakout above the resistance at line a.

The weekly trading range (lines a and b) has upside targets in the $60-$61 area.

The relative performance is just holding above its rising WMA with stronger support at line i.

The daily RS line turned higher over the past two days and is positive.

The weekly OBV is back above its WMA but has not yet confirmed the recent highs.

A drop in the OBV below the early May lows would be a sign of weakness.

What it Means: When looking at establishing new positions, you must first determine whether they are in a high-risk buy area and then where you would place a stop. All for of these stocks are quite close to their all-time highs, so following the crowd with these four stocks has too much risk.

In the current environment, stocks that are well below their recent highs and have just completed corrections are favored. The trading is often quite choppy in the summer and those who are not in stocks should still consider the three large ETFs that I recently recommended in A Portfolio That Won't Ruin Your Summer.

How to Profit: No new recommendation

Editor's Note: I will be out for the rest of the week, so the next Charts in Play article will be released on June 23. Though I will be traveling, I will try and Tweet if I see a significant change in the markets.